Things Could Get Even Worse For Best Buy

Best Buy shares
are falling after
the company reported abysmal holiday sales results.

The plunge is surprising to many because Best Buy's turnaround
had been lauded by Wall Street analysts for the past year.

CEO Hubert Joly presented
an impressive strategy that included improving customer
service, lowering prices on key items like televisions, and
offering a wider variety of assortments.

Joly also implemented a price-matching policy that was supposed
to help Best Buy compete with Amazon. This plan impressed the
investment community: shares more than tripled in 2013.

But it wasn't enough to translate to real profits for Best Buy,
said Brian Sozzi, chief equities strategist at Belus Capital
Advisors.

That's because consumers just aren't buying many of the
categories that Best Buy sells, Sozzi says.

"Not enough products are winning yet to overcome weakness
in the downtrending categories such as digital imaging, movies,
etc.," he writes.

It's also concerning that Best Buy blamed "supply
constraints" for the downturn because the chain needs to
provide compelling new product to get customers in stores,
Sozzi said.

Best Buy's current products don't interest customers, and
it can't secure the new products they do want.

That means things could get even worse soon.

"Expect a sizable store closure program announcement by
Best Buy when it reports its full earnings," Sozzi
said.

The company blamed price competitiveness for eroding
margins during the holiday.

A Best Buy spokesperson denied store
closures.

"As our CEO Hubert Joly has said previously and reiterated
today, the vast majority of our cost savings is not related
to headcount and we will maintain that approach," spokesman
Jon Sandler told us in a phone call. "We've also been very
clear that closing stores is not a recipe or magic wand for
us. We look at our store portfolio on an ongoing basis –
which is a normal course of business for any retailer."